What Features Should be Free and What Should be Paid in a Freemium Subscription?
I get asked all the time what features should be freemium (aka free forever) and what features should go behind the paywall.
The answer is, of course, it depends.
But here are some useful frameworks.
Does your business model depend on VIRAL MARKETING?
If your “free” subscribers are a marketing channel for attracting paid subscribers, you might want to invest in making your offering attractive for free subscribers.
Does your business model depend on a NETWORK EFFECT?
If your free subscribers create value for your paying subscribers, simply by participating in your network, and are part of the product, you might think of your investment in features for free subscribers as part of your product development investment. This could be through their content, through their data, or even through their eyeballs.
Does a significant percentage of your freemium subscribers predictably CONVERT to paid?
if your free subscribers are your best acquisition channel, that’s a good reason for continued investment from your lead gen budget.
There are some other things to consider as well.
Have you ALREADY offered the feature for FREE?
Many businesses launch with generous free offerings, planning to “monetize later”. This can be an effective way to build community or to beat competitors in a land grab situation. However, when you build a trusted ongoing relationship by giving stuff away for free, you might be building an expectation, an implied commitment, to giving it away for free forever. It can be very hard to put something previously available for free behind a paywall.
Are you obviously making MONEY from their participation?
Above, I mentioned how many businesses make money from the free subscribers. This can be an advertising model, where the business attracts a particular audience that is attractive to advertisers, who pay to be able to address the audience. It can also be a community where there’s no value to the paying subscribers if the free subscribers aren’t participating (like LinkedIn — would it still be valuable for recruiters, jobseekers and sales people if the rest of us weren’t here?) Or it can be a situation where the data is aggregated, analyzed and sold to other parties.
This might be an ethical situation. Is it fair to charge subscribers and also serve up their engagement as a product for other customers? Isn’t your obligation to subscribers to optimize for their needs?
It might also be a positioning challenge-consumers are increasingly savvy. If they realize that they’re the product, not only might they expect features and benefits for free, it’s reasonable that some might expect to be paid
The Top Guiding Principle
Be clear on your “forever promise”. You might have a different promise for your free subscribers than your paying ones, or the same one but to different degrees. In either case, you need to be clear to your members about what they can expect from you. Forever.